In recent years, the Commonwealth of Puerto Rico (CPR) has faced a fiscal crisis resulting from economic contraction, high public sector debt levels, outmigration, and other factors. In recent weeks, the finances of the Puerto Rico Electric Power Authority (PREPA)—or in Spanish, the Autoridad de Energía Eléctrica (AEE)—have attracted specific attention. PREPA's debt—about $9 billion—is larger than that of any other operational U.S. public corporation. Planned actions to address the debt, and high electricity prices due to the deteriorating state of the island's generating and transmission infrastructure, may adversely affect its economic development prospects and the well-being of its residents. Moreover, the restructuring of PREPA could have wider implications for municipal finance and infrastructure policy.

The PREPA fiscal plan outlined proposals and projections for the utility's finances, operations, capital investments, and market environment for the coming decade. The plan projected a 23% reduction in energy sales, and called for setting a $0.21 per kWh target rate by 2023.

PREPA's business practices have also raised concerns. PREPA's revenues are reduced by unbilled power generation, with approximately 14% of power generated by PREPA classified as lost or unaccounted for in recent years. PREPA had not been billing many municipalities and government offices, in part to offset payments in lieu of taxation, as well as some nonprofit organizations and businesses. PREPA has recently become more aggressive in collecting past due amounts. Some of PREPA's largest unpaid accounts, however, were accumulated by other public corporations that are also facing debt restructuring processes.

PREPA's Prospects

Now that PREPA has entered into a PROMESA Title III debt restructuring process, changes in the structure, finances, and operations of the utility appear likely. How well PREPA serves its mission in future years may well depend on changes in its governance. Some have called for privatizing PREPA as a means of addressing governance issues. Measures imposed through the RSA, such as appointing a more technically oriented board and a CRO, might also be seen as hardening fiscal constraints. Recent changes in PREPA's board have raised concerns among creditors, while the Governor views those changes as necessary for implementing his proposals to rescue the utility.